March 27, 2018
The number of new office buildings constructed since the financial crisis in 2008 has fallen in a year on year comparison by 56 percent, according to an analysis of planning applications carried out by property lending platform Lendy. The authors claim that the primary reason for the sharp decrease has been the greater uptake of flexible working and coworking models of space use. According to the study, only 2,300 applications to build new office buildings were approved last year, down from 5,200 in 2007/8. Lendy adds that applications to build new offices have also fallen since the financial crisis – down 58 percent to 2,500 last year from 6,000 in 2007/08. Flexible working has reduced the requirement for new office buildings. Other innovations, such as shared workspace and coworking, have reduced the need for employees to have their own dedicated workspace, according to the report.
Low levels of bank lending to property developers has also hampered the construction of new office buildings. Bank of England figures show that in December 2013, over £34 billion in lending was outstanding from banks to property developers, but this plunged to just £14.8 billion in December 2017. As a result of the lack of bank lending to property developers, more and more are turning to alternative forms of finance, such as peer-to-peer, to get more projects started.
Liam Brooke, co-founder of Lendy, says: “Modern ways of working mean that offices are no longer as essential as they may have been in the past. Formerly, rising employment figures may have signalled a requirement for more offices. However, there is now less need for offices as employees can, in many cases, work just as effectively from home or shared workspaces. Demand for new offices is still out there, but banks simply aren’t lending enough to property developers to allow them to get their projects off the ground. This is why we are seeing more and more developers choose alternative finance options to fund their projects.”